Business jet makers face battle on pricing as deliveries drop

Reuters Staff

3 Min Read

* Industry deliveries to drop 10 pct in 2016 - Bombardier

* Buyers in Middle East, Brazil, Russia hesitant

* Makers cut output to protect prices

By Cyril Altmeyer

GENEVA, May 26 (Reuters) - Business jet manufacturers are locked in a price battle as deliveries of new aircraft remain weak and recently sold aircraft come back onto the market at attractive prices, delegates at an annual corporate jet convention said.

Demand for business jets reflects the health of economies and makers of corporate planes have been hard hit since the financial crisis.

Bombardier, unveiling its 10-year market forecast at the EBACE show in Geneva, projected industry deliveries to drop 10 percent this year to 540-560 jets after rising 1 percent in 2015. That compares with the peak of 811 deliveries in 2008.

“There is more offer than demand, there are too many airplanes in production,” said Marco Tuilo Pellegrini, president and CEO of Embraer Executive Jets, highlighting competition from the market for used jets.

“The price war is being felt across the whole range,” Eric Trappier, CEO of Dassault Aviation, told Reuters.

Pellegrini said the economic downturn in Brazil meant it was hard to sell business jets there, while the drop in oil prices had made potential purchasers in the Middle East and Russia more hesitant.

Production cuts by some manufacturers will also weigh on deliveries this year, though Bombardier sees a pick up in global growth boosting demand over its 10-year forecast horizon.

Bombardier last year decided to cut its output and expects to deliver 150 business jets this year against 200 last year. It says this strategy means its aircraft are retaining value better than rivals.

“Many people that come in to buy an aircraft already have an old one, so the price that they can get for their used aircraft is what’s going to enable them to buy a new one, so we have to protect the pricing of pre-owned aircraft,” said Brad Nolen, Director Product Strategy and Market Development of Bombardier.

However, there were some signs of optimism for business aviation, with the North American market the most dynamic, expected to account for almost half of the 8,300 deliveries forecast over the next 10 years, according to Bombardier.

Manufacturer Gulfstream Aerospace, part of General Dynamics , said Asia had been strong in late 2015 and early 2016, echoed by aircraft sales company Jetcraft, which said it had had its best first quarter ever in 2016.

“Even though China is a little bit slower than it used to be, we’re actually seeing quite a bit of activity and not just in China,” Chief Operating Officer Peter Antonenko said, pointing to deals in Japan, Indonesia and Malaysia. (Reporting by Cyril Altmeyer; Writing by Victoria Bryan; Editing by Mark Potter)